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The Determinants of RBA Target Rate Decisions: A Choice Modelling Approach
Author(s) -
Smales Lee A.
Publication year - 2013
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12063
Subject(s) - governor , economics , inflation (cosmology) , inflation rate , inflation targeting , econometrics , monetary economics , macroeconomics , monetary policy , engineering , physics , theoretical physics , aerospace engineering
This article examines the determinants of Reserve Bank of Australia ( RBA ) target rate decisions in the period following the introduction of inflation targeting (1993–2012). A choice modelling approach reveals asymmetry in RBA policy such that the RBA is more concerned about inflation rising above the target band, and the threshold for cutting rates is greater than that required to hike rates. While there is evidence of the RBA following mandated objectives, the likelihood of rate reductions has increased following the appointment of Glenn Stevens, although his term as Governor has coincided with extraordinary economic conditions.